(Updates with details on transaction from Freddie.)
DOW JONES NEWSWIRES
Freddie Mac (FRE) on Monday announced plans to repurchase up to
$30 billion of debt securities coming due in the next 15 months as
the mortgage giant continues to deal with surging loan losses.
The debt currently has $69.9 billion in principal outstanding.
The tender offer expires at 5 p.m. EDT Friday.
Freddie last month reported a loss of $9.85 billion for the
first quarter amid mounting mortgage-default costs, and said it
will need another $6.1 billion of capital from the U.S. Treasury
Department.
The company is undertaking the buyback as a way of managing its
liabilities, said Mohit Sudhakar, Freddie's senior director of debt
portfolio management.
Freddie wants to retire a portion of its short, floating rate
securities that mature over the next 12 to 15 months and issue
longer maturing debt with cheaper risk premiums paid to investors,
he said.
The company will use a variety of funding sources to finance the
tender offer including discount notes and longer maturing debt,
Sudhakar said.
Federal regulators seized control of Freddie and its larger peer
Fannie Mae (FNM), the two main providers of funds for U.S. home
mortgages, in September as growing losses ate through their thin
layers of capital. The Treasury has agreed to provide as much as
$200 billion of capital apiece to Fannie and Freddie by purchasing
preferred stock paying 10% dividends. With its latest request, that
would bring Freddie's total to about $51 billion.
-By Kevin Kingsbury, Dow Jones Newswires; 201-938-2136;
kevin.kingsbury@dowjones.com
(Prabha Natarajan contributed to this report.)